NEW YORK: The US stock markets closed the week on a high note, rallying after a robust jobs report and the successful passage of a debt limit deal in Congress. The stronger-than-expected employment data, released on Friday, indicated the resilience of the US economy despite efforts by the Federal Reserve to temper demand and address high inflation.
The positive jobs report, which showed the addition of 339,000 jobs in May, provided reassurance that the US economy is not facing an immediate risk of recession, according to analysts. Although the unemployment rate increased to 3.7 percent and wage gains fell, the labor market remained strong.
The passage of the debt limit deal through both houses of Congress further allayed market concerns about a potential debt default, leading to a significant drop in Wall Street’s “fear gauge” to its lowest level since before the Covid-19 pandemic.
As a result, US stocks surged, with the Dow, S&P 500, and Nasdaq all closing in positive territory. The upbeat sentiment spread to global markets, with Asian and European stocks also experiencing gains. The US dollar strengthened against rival currencies, while oil prices jumped ahead of a crucial meeting of the OPEC+ group of crude producers.
Mixed Jobs Report Prompts Varying Predictions
The Federal Reserve now faces pressure to decide on its monetary policy approach, as the mixed jobs report has prompted varying predictions. Some analysts believe that the higher-than-expected job creation figures will push the Fed to continue its path of increasing interest rates, with expectations of a 25 basis points hike at the next meeting.
However, others suggest that the Fed could potentially skip a rate hike in June and opt for more tightening later in the year, given the mixed nature of the jobs report.
In other market news, London stocks received a boost after Dechra Pharmaceuticals agreed to a £4.5-billion ($5.6-billion) takeover by Swedish private equity firm EQT and the Abu Dhabi Investment Authority.